Europe’s leading investment banks and stock exchanges have clashed over the need for greater regulation of dark pools, the fast-growing bank-owned platforms that are taking market share from incumbent trading venues.

Europe’s equities exchanges have called on the European Commission to impose tougher regulations on the bank-owned anonymous trading platforms, claiming they have an unfair advantage over their own public systems because they are not subject to the same scrutiny.

Judith Hardt, secretary-general of Fese, said: “This business competes with the regulated markets and multi-lateral trading facilities without being subjected to the same regulation. The lack of information related to the trades would trigger concerns about the integrity of the market.”

However, the banks dismiss these arguments. They say that exchanges are looking to take advantage of “pro-regulation, pro-transparency” sympathies to limit competition and stem the shift of trading activity away from the exchanges to new venues. Credit Suisse and Goldman Sachs – which are among those that own dark pools – met the commission last week to try to persuade it to ignore the calls, according to sources close to the banks. The commission plans this year to review the effect of its 2007 trading reforms, the Markets in Financial Instruments Directive, including the impact of dark pools.

A spokesman for the Committee of European Securities Regulators, which has polled exchanges and the banks for their views, said: “We hope to have that work completed in a matter of weeks. We will then forward this data to the European Commission, which will then use the information as part of its larger Mifid review and may propose rule changes, in collaboration with CESR at the appropriate time.”

At the moment, dark pools are regulated like any other investment banking function, but the exchanges hope the commission will decide that the platforms should be regulated to the same extent as they are.

That would mean the banks would have to close their dark pools and undertake a lengthy and costly application to the Financial Services Authority that could take them out of action for months, handing the initiative back to the exchanges.

Trading in the dark pools has grown in the past two years as institutions have sought to minimise the impact on share price movement of trading large orders.

Yet the two sides are sharply at odds over how much trading the pools attract. The federation, which represents European exchange giants NYSE Euronext and Deutsche Börse but not the London Stock Exchange which quit the group last September, said that as much as 40% of the European equity market could be traded in bank dark pools. However, the banks claim they account for less than 1.5% of all trading.

George Andreadis, European head of Advanced Execution Services liquidity strategy at Credit Suisse, said: “There have been different groups lobbying the Committee of European Securities Regulators and the commission which have said that up to 40% of European trading is executed through broker crossing networks. These figures have been categorically refuted by FSA data published in December.”

Credit Suisse, which has one of the largest dark pools in Europe, said last week that in the three months to the end of last year its Crossfinder system traded just €10bn ($14.1bn). This is less than 0.5% of the total European equity trading in that quarter, according to data from Thomson Reuters.

• Shedding light on the dark pools: the market in numbers

1.25% European market share held by the largest London-based pools, according to the banks

40% Market share of dark pools, according to the stock exchanges

18/11/1998 The first European dark pool goes live

6 Current number of bank dark pools

11 Number of independent or exchange dark pools

€10.8bn Value traded on non-bank dark pools at its peak, in November 2009

€2.9bn Value traded on the largest independent dark pool Chi-X Europe in November